Increasingly strict sanctions on Iran—sanctions that primarily target Iran’s key energy sector aswell as its ability to access the international financial system—have harmed Iran’s economy, butnot to the point where key Iran leaders have been compelled to reach a compromise with theinternational community on Iran’s nuclear program. The strategic effects of sanctions might beabating as Iran adjusts to them economically and advertises the adverse humanitarian effects. Nevertheless, the June 14, 2013, election of Hassan Rouhani, who ran on a platform of achievingan easing of sanctions, as Iran’s president suggests that sanctions are affecting political outcomesin Iran.

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Oil exports fund nearly half of Iran’s government expenditures, and Iran’s oilexports have declined to about 1.25 million barrels—a halving from the 2.5million barrels per day Iran exported during 2011. The causes of the drop have been a European Union embargo on purchases of Iranian crude oil and decisions by other Iranian oil customers to obtain exemptions from U.S. sanctions bysubstantially reducing purchases of Iranian oil. To date, 20 of Iran’s oil customersmaintain such exemptions.

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The loss of revenues from oil, coupled with the cut-off of Iran from theinternational banking system, has caused a sharp drop in the value of Iran’scurrency, the rial, and caused inflation to increase to well over 50%. Iran’seconomy shrank slightly from 2012-2013 and will likely do so again during2013. There have also been unintended consequences including a shortage of some advanced Western-made medicines.

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Iran has found some ways to mitigate the economic and political effects of sanctions. Government-linked entities are creating front companies and makingincreased use of barter trade. Iranian traders are using informal banking exchangemechanisms and, benefitting from the fall in the value of Iran’s currency,increasing non-oil exports. Affluent Iranians are investing in—and driving up prices for—real estate and securities listed on the Tehran stock exchange.Sanctions have not compelled Iran to change its position on its nuclear program, but might beslowing Iran’s nuclear and missile programs by hampering Iran’s ability to obtain needed foreigntechnology. Department of Defense and other assessments indicate that sanctions have notstopped Iran from developing new conventional weaponry indigenously. Iran is also judged notcomplying with U.N. requirements that it halt any weapons shipments outside its borders, particularly for providing arms to the embattled Assad government in Syria. And, sanctions do notappear to have altered Iran’s repression of dissent or its efforts to monitor public use of theInternet.Some in Congress believe that economic pressure on Iran needs to increase. In the 112

) madesanctionable the shipping of Iranian crude oil, and it enhanced human rights-related provisions of previous Iran-related laws. A provision of the FY2013 National Defense Authorization Act (P.L.112-239) sanctions transactions with several key sectors of Iran’s economy. A bill in the 113

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Congress, H.R. 850, reported out of the House Foreign Affairs Committee on May 22, 2013,would expand the range of Iranian economic sectors subject to sanctions, sanction banks thatexchange Iran’s hard currency abroad, and accelerate the oil purchase reductions required to

Iran SanctionsCongressional Research Service

maintain a sanctions exemption. For a broader analysis of policy on Iran, see CRS ReportRL32048,